Copper Inventories Have Plunged, So Is The Metal’s Price Set For A Rise?

Copper Inventories Have Plunged, So Is The Metal’s Price Set For A Rise?
Reda Farran, CFA

over 1 year ago2 mins

The global inventories of copper have been lower than usual all year (medium blue line), but their current levels could be cause for alarm. The market today has only enough inventory to cover 4.9 days of global demand – and is expected to finish the year at just 2.7 days, according to commodity trading giant Trafigura. For reference, copper stocks are usually counted in weeks, not days. The shortfall raises the risk that a further drawdown could spark a sudden price surge – and a dash among commodity traders to secure supplies.

Copper bulls say that risk just adds to the case for buying in. The red metal – used in wind turbines, solar panels, power cables, EVs, and a lot more – will continue to see its long-term demand boosted by megatrends like renewable energy and the electrification of transport. What’s more, with the energy crisis thrown up this year by Russia, Western governments are working more urgently to reduce their reliance on fossil fuels, and are looking to build out wind, solar, and other technologies that depend on copper.

Copper bears still see troubles ahead, arguing that the slowdown in China’s property market – where the metal is used in wiring, plumbing, and facades – and a potential global recession will weigh on demand. Those fears have, after all, sent copper’s price down about 30% from the record high it hit back in March. But Trafigura expects EV- and infrastructure-related copper demand to more than make up for the weakness in China’s real estate sector. Time will tell who’ll prove to be correct.

To bet on a rise for copper, consider investing in the United States Copper Index Fund (ticker: CPER; expense ratio: 0.80%) from the US, or in the WisdomTree Copper ETF (COPA; 0.49%) from Europe.

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